[House Hearing, 114 Congress]
[From the U.S. Government Publishing Office]



 
                NATIONAL SECURITY BENEFITS OF TRADE 
                   AGREEMENTS WITH ASIA AND EUROPE

=======================================================================

                                HEARING

                               BEFORE THE

         SUBCOMMITTEE ON TERRORISM, NONPROLIFERATION, AND TRADE

                                 OF THE

                      COMMITTEE ON FOREIGN AFFAIRS
                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED FOURTEENTH CONGRESS

                             FIRST SESSION

                               __________

                             MARCH 17, 2015

                               __________

                           Serial No. 114-11

                               __________

        Printed for the use of the Committee on Foreign Affairs
        
        
        
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                      COMMITTEE ON FOREIGN AFFAIRS



                 EDWARD R. ROYCE, California, Chairman
CHRISTOPHER H. SMITH, New Jersey     ELIOT L. ENGEL, New York
ILEANA ROS-LEHTINEN, Florida         BRAD SHERMAN, California
DANA ROHRABACHER, California         GREGORY W. MEEKS, New York
STEVE CHABOT, Ohio                   ALBIO SIRES, New Jersey
JOE WILSON, South Carolina           GERALD E. CONNOLLY, Virginia
MICHAEL T. McCAUL, Texas             THEODORE E. DEUTCH, Florida
TED POE, Texas                       BRIAN HIGGINS, New York
MATT SALMON, Arizona                 KAREN BASS, California
DARRELL E. ISSA, California          WILLIAM KEATING, Massachusetts
TOM MARINO, Pennsylvania             DAVID CICILLINE, Rhode Island
JEFF DUNCAN, South Carolina          ALAN GRAYSON, Florida
MO BROOKS, Alabama                   AMI BERA, California
PAUL COOK, California                ALAN S. LOWENTHAL, California
RANDY K. WEBER SR., Texas            GRACE MENG, New York
SCOTT PERRY, Pennsylvania            LOIS FRANKEL, Florida
RON DeSANTIS, Florida                TULSI GABBARD, Hawaii
MARK MEADOWS, North Carolina         JOAQUIN CASTRO, Texas
TED S. YOHO, Florida                 ROBIN L. KELLY, Illinois
CURT CLAWSON, Florida                BRENDAN F. BOYLE, Pennsylvania
SCOTT DesJARLAIS, Tennessee
REID J. RIBBLE, Wisconsin
DAVID A. TROTT, Michigan
LEE M. ZELDIN, New York
TOM EMMER, Minnesota

     Amy Porter, Chief of Staff      Thomas Sheehy, Staff Director

               Jason Steinbaum, Democratic Staff Director
                                 ------                                

         Subcommittee on Terrorism, Nonproliferation, and Trade

                        TED POE, Texas, Chairman
JOE WILSON, South Carolina           WILLIAM KEATING, Massachusetts
DARRELL E. ISSA, California          BRAD SHERMAN, California
PAUL COOK, California                BRIAN HIGGINS, New York
SCOTT PERRY, Pennsylvania            JOAQUIN CASTRO, Texas
REID J. RIBBLE, Wisconsin            ROBIN L. KELLY, Illinois
LEE M. ZELDIN, New York
                            C O N T E N T S

                              ----------                              
                                                                   Page

                               WITNESSES

The Honorable Carla A. Hills, co-chairman, Council on Foreign 
  Relations (former U.S. Trade Representative)...................     5
Michael J. Green, Ph.D., senior vice president for Asia and Japan 
  chair, Center for Strategic and International Studies..........    11
Daniel S. Hamilton, Ph.D., director, Center for Transatlantic 
  Relations, The Paul H. Nitze School of Advanced International 
  Studies, Johns Hopkins University..............................    18

          LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING

The Honorable Carla A. Hills: Prepared statement.................     8
Michael J. Green, Ph.D.: Prepared statement......................    13
Daniel S. Hamilton, Ph.D.: Prepared statement....................    20

                                APPENDIX

Hearing notice...................................................    40
Hearing minutes..................................................    41


  NATIONAL SECURITY BENEFITS OF TRADE AGREEMENTS WITH ASIA AND EUROPE

                              ----------                              


                        TUESDAY, MARCH 17, 2015

                     House of Representatives,    

        Subcommittee on Terrorism, Nonproliferation, and Trade,

                     Committee on Foreign Affairs,

                            Washington, DC.

    The committee met, pursuant to notice, at 2 o'clock p.m., 
in room 2172 Rayburn House Office Building, Hon. Ted Poe 
(chairman of the subcommittee) presiding.
    Mr. Poe. The subcommittee will come to order. Without 
objection, all members may have 5 days to submit statements, 
questions, and extraneous materials for the record subject to 
the limitation in the rules. I will now introduce myself for 5 
minutes for an opening statement, and then the ranking member 
will give his opening statement.
    I am from the State of Texas. I live in the Houston area 
and trade is the life blood of my district. Over half of 
Houston, Texas' economy depends upon the Port of Houston. Many 
people don't know that, even in Texas. And study after study 
has shown that the more we trade, the more jobs there are in 
the United States for Americans. The Port of Houston is an 
export port. We export everything from fuel to little widgets 
that make valves in foreign countries. Trade is more than just 
a market access and jobs. Trade is a key part of foreign 
policy. It is also part of, I believe, national security.
    One of the biggest reasons why we won the Cold War is 
because our economic model was so much better than that of the 
Communist system. People around the world compared our economy 
to the Soviet Union's and could see the difference and where 
the U.S. was the beacon of freedom and free enterprise, the 
USSR was all about government control. And when the U.S. opened 
up trade around the world, USSR closed itself off.
    Countries now in Asia are eager to reduce their economic 
dependence upon China. They don't like Beijing's economic 
model. They would much rather have a region based upon free 
market principles. TPP is our opportunity to move into the 
region in a free market direction and compete with China. It is 
much better if the United States takes the lead in writing the 
economic rules for the 21st century in Asia than if China did. 
China steals intellectual property. It has state-owned 
enterprises that get unfair subsidies from the central 
government and it would not seem to me to be wise for the 
Chinese model to expand in Asia.
    The trade agreement written by China is going to be a lot 
worse for American interest than if we write it. If we don't 
get TPP accomplished, it is just not an economic price that we 
pay. We would essentially be telling Asia that the United 
States is not interested in Asia. Asian countries will 
basically have no choice but to look to China as a trading 
partner.
    But there are also other strategic advantages for TPP. The 
more economically connected we become in Asia, the closer 
cooperation opens up in other areas like counterterrorism. For 
example, Malaysia has had a problem with ISIS supporters. With 
strong trade, we give governments with such types of ISIS 
problems an incentive to work together on those kinds of tough 
problems and solve them together. TPP is a chance for the 
United States to show Asia that we care. Asia does not have to 
submit to China's ways, and know that we can work together. But 
most importantly, TPP is a credit for the United States.
    A free trade deal the United States is negotiating with the 
European Union, known as TTIP, offers similar strategic 
advantages. Even more aggressive than China, Russia took over 
the sovereign territory of Ukraine. I have met with the 
Ambassadors of other countries in the Baltics. The Bulgarians, 
and Romanians feel like they could be next for Russian 
aggression. One of the reasons why it has been so hard to 
cooperate with the EU on these issues is that Russia uses 
Europe's dependence on Russia for energy to blackmail Europe. 
Countries like Latvia, Finland, and Sweden get 100 percent of 
their natural gas from Russia. Twelve countries in the EU get 
over half their natural gas from Russia, so Russia threatens 
Europe to get to them to do what Moscow wants.
    Right now in the United States there is more natural gas 
than we can use, but the United States Government will not 
allow American companies to export natural gas. The only 
exceptions are for companies exporting to a country with whom 
we have a free trade agreement or companies that get special 
approval from the Department of Energy.
    The Department of Energy approval process has been slow, so 
slow that drillers have stopped drilling because they know they 
can't sell it. The long-term solution to this problem is to get 
American companies sell natural gas around the world, but, in 
the meantime, if we get TTIP done that also means we can export 
LNG eventually to every country in the European Union and 
Russia would no longer have a stranglehold over Europe. No 
longer would Europe be reluctant to get tougher with Russia and 
their aggression. This is just one strategic advantage of TTIP. 
I think there are others.
    Finally, TTIP and TPP could help push the world toward 
greater liberalization. Formal global trade negotiations in 
Doha are on hold, but together TTIP and TPP represent 90 
percent of the world's GDP. These pacts help set the global 
standard. And countries who do not want to be left out would 
have to agree to the tough standards set by these agreements in 
order to enjoy the benefits.
    Trade agreements have a geopolitical effect far beyond 
trade itself. I will now yield to the ranking member, Mr. 
Keating from Massachusetts, for his 5-minute opening statement.
    Mr. Keating. Thank you, Chairman Poe, for holding today's 
hearing. And while I believe that there is a link between trade 
and national security, I do not think that this correlation 
should outweigh other serious concerns. For example, when the 
existential need to counterbalance China exists, the fact 
remains that several of the countries participating in the 
Trans-Pacific Partnership, or TPP, negotiations remain stark 
violators of core international standards. In fact, despite 
claims that this agreement will better protect workers, at 
least four of the major countries included in TPP are already 
out of compliance with the international labor organizations' 
core labor standards.
    In Mexico, Malaysia, Vietnam, and Brunei, workers face on-
going and systematic abuse with each of them out of compliance. 
I am additionally skeptical of the TPP agreement that goes 
without meaningfully addressing currency manipulation, 
protecting domestic manufacturers, banning commercial whaling, 
and ensuring transparency.
    Further, I am still unsure of what benefits this agreement 
would bring to the U.S. Just last week, a record breaking $3-
billion deficit with Korea was announced by the Census Bureau. 
These deficits equate to job losses and as we approach the 3-
year anniversary of the signing of the U.S.-Korea free trade 
agreement, the numbers do not bode well for the future of TPP. 
Quite frankly, there is still a lot left to be desired with TPP 
and I am not sure the potential national security benefits are 
worth the sacrifice to American families.
    Yet, one trade agreement, if negotiated with global 
standards in line, may provide new means to uphold the norms 
that underpin the international trading system. The 
Transatlantic Trade and Investment Partnership, or TTIP, has 
remarkable potential to promote economic growth and create jobs 
throughout the United States and European Union. Since this 
agreement is between two economies that share a strong 
commitment to the rule of law, transparency, and free markets, 
it can help elevate health, safety, labor, and environmental 
standards worldwide. Beyond trade and investment, TTIP, also 
has significant strategic implications. The importance of the 
Transatlantic Alliance has been underscored by Russia's 
invasion of Ukraine, its increasing hostility toward 
neighboring states, and the continued decline of fundamental 
rights and a rule of law under the Putin regime.
    The strengthening ties between the United States and the EU 
that would result from TTIP would only complement the united 
front that the U.S. and the EU have maintained throughout the 
Ukraine crisis. TTIP would highlight the virtues of the Western 
model and send a powerful signal to Putin and other 
authoritarian regimes that the United States and Europe remain 
as united as they ever were.
    Further, our commitment to higher standards and basic 
democratic principles is the basis for our prosperity, and that 
prosperity is our best defense against governments that seek to 
destabilize international order.
    To conclude, Mr. Chairman, I think that the trade 
discussions cannot be black and white. They should be as varied 
as the countries and standards and the opportunities 
represented in agreements themselves. And I look forward to 
today's discussion and with that, I yield back.
    Mr. Poe. I thank the gentleman. The chair will now 
recognize the gentleman--I started to say UCLA, but I better 
say just California, Mr. Issa, for his opening statement. One 
minute per member.
    Mr. Issa. Thank you, Mr. Chairman, and Ambassador, I did 
fail to mention you are LA born, so perhaps UCLA is legitimate. 
I am not going to get in the middle of that.
    Chairman, I thank you for this important hearing. And in 
brief, I agree more with Mr. Keating's comments than I normally 
would. The fact is you cannot look at trade agreements in the 
light only of the trade or all of them being equal. We do have 
to look at labor laws, rule of law, and of course, the global 
war on terror slash whatever other names you want to put on it. 
We have to look at defense cooperation. We have to basically 
even the playing field with all of our trade agreements. Most 
of our trade agreements, including the one that I testified as 
a civilian which was NAFTA during the Bush and early Clinton 
years, were, in fact, about two of our closest neighbors on 
which we had very few of these other issues to decide. But I 
look forward to hearing from our witnesses. I join with the 
chairman and the ranking member in saying that global free 
trade is essential. We need to compete with China, but we also 
need to compete with people that we can rely on in a number of 
areas. I thank the chairman for his indulgence and yield back.
    Mr. Poe. The chair will yield a minute to the other 
gentleman from California, Mr. Sherman.
    Mr. Sherman. Trade is critically important. That is why we 
have to get it right which is hard to do when those in power in 
our country benefit so much whenever we get it wrong. We are 
told that we should be proud of the trade rules because we 
wrote them. Yes, we wrote these trade rules and now we should 
be as proud of them as the citizens of Madrid are of the 
Spanish flu. We made the trade rules so that we will be making 
nothing else in the United States. This deal is so bad 
economically, they are trying to sell it on national security 
grounds. But what does it do? It entrenches China two ways. 
First, we have given up on currency manipulation. Why? Just 
because we don't mention currency manipulation does not mean 
the Chinese are cheating less. I have only been married a few 
years, but I am told that I shouldn't----
    Mr. Poe. Don't go there. Just don't go there.
    Mr. Sherman. I shouldn't use that line with my wife. 
``Honey, I am cheating less'' probably wouldn't do me any good. 
Second, because of the rules of origin, we are going to see 
products 50, 60, and really 80 and 90 percent made in China 
with free access to the United States' market, and us getting 
no access there. It is time for us to stand up for American 
security that includes our economic security. It is time for us 
not to juxtapose these bad deals against the status quo, but 
these bad deals and the status quo against fair trade, against 
real results-oriented trade agreements designed to bring our 
trade deficit to zero within 10 years. I yield back.
    Mr. Poe. The chair recognizes Mr. Perry for a minute.
    Mr. Perry. I thank the chairman for holding this important 
hearing. I don't know if the record should reflect that the 
gentleman from California just admitted that he is cheating, 
but it seems like in a way----
    Mr. Sherman. Less. Less.
    Mr. Perry. Oh, less. So important, right, exactly.
    Mr. Sherman. If China gets our way with it, well, maybe 
not.
    Mr. Perry. Generally, when we talk about trade agreements 
in Congress, the media and a lot of people focus on limited, 
purely the economic implications. And while the economics of 
trade are obviously important, there is a subtle, but 
unquestionable geostrategic value associated with these global 
economic partnerships. For example, along with the other 
actions with our partners, the strategic value of giving our 
European allies an alternative to Russian gas through American 
LNG and the now realized cost of not doing so cannot be 
understated. With that, I am pleased to be here to receive your 
input on this topic of great importance and I yield back.
    Mr. Poe. The gentleman yields back. Does anyone else wish 
to be recognized for an opening statement? Ms. Kelly? All 
right, I will now introduce the witnesses that we have before 
us.
    Ambassador Carla Hills is the co-chair of the Council on 
Foreign Relations and chairperson and CEO of Hills & Company 
International Consultants. Ambassador Hills has previously 
served as United States Trade Representative and as Secretary 
of the Department of Housing and Urban Development.
    Dr. Michael Green is senior vice president for Asia and 
Japan chair of the Center for Strategic and International 
Studies. Dr. Green is also associate professor at the Edmund A. 
Walsh School of Foreign Service at Georgetown University.
    And Dr. Dan Hamilton is the Austrian Marshall Plan 
Foundation professor and director of the Center for 
Transatlantic Relations at the Paul H. Nitze School of Advanced 
International Studies at Johns Hopkins University. Dr. Hamilton 
is an award-winning author on the Transatlantic Economy and has 
previously held a variety of senior U.S. Government positions.
    Ambassador Hills, we will start with you. You have 5 
minutes.

STATEMENT OF THE HONORABLE CARLA A. HILLS, CO-CHAIRMAN, COUNCIL 
    ON FOREIGN RELATIONS (FORMER U.S. TRADE REPRESENTATIVE)

    Ambassador Hills. Mr. Chairman, Mr. Ranking Member, and 
members of the committee, I thank you for inviting me to give 
you my point of view on the national security implications of 
free trade agreements and the importance that Trade Promotion 
Authority has on our nation's ability to conclude effective 
agreements.
    Our nations' experience shows that free trade agreements 
have a positive effect on our national security interests. Free 
trade agreements stimulates economic growth. As economist Gary 
Hufbauer at the Peterson Institute for International Economics 
calculates that the opening of our markets since World War II 
has increased our nation's GDP by roughly $1 trillion. That 
increase in economic strength has contributed substantially to 
our nation's ability to maintain the strongest defense 
capability in the world.
    The opening of markets has also strengthened the economies 
of our major allies and brought us closer together on a number 
of issues.
    Developing countries have benefitted as well. According to 
studies by Dr. William Cline at the Center for Global 
Development, the removal of trade barriers on goods produced by 
developing countries has a direct correlation to their success 
in reducing poverty. And according to his calculations, on 
average, when a developing country increases its ratio of trade 
to its total output by just 1 percent, it achieves a 1-percent 
reduction in its level of poverty. And reducing global poverty 
through trade agreement not only advances our development 
goals, it creates for us, as did our Marshall Plan, new 
economic opportunities.
    In addition, the negotiation of trade agreements with 
poorer countries helps to avoid or reduce potential national 
security challenges, for failure to enlarge their economic 
opportunities makes them more susceptible to recruitment by 
those who would do us harm.
    Also impoverished nations often lose the ability to enforce 
their laws or secure their borders, making it more difficult 
for our Government to deal with security problems like 
terrorism. And enlarging their opportunities reduces their 
potential for instability which advances our national security 
interests.
    Continuing to build on our nation's economic strength 
through strong trade agreements with countries rich and poor 
will help ensure that we have the necessary resources going 
forward to support equipment, technology, and manpower we need 
to protect our security interests.
    And Trade Promotion Authority, TPA, is a critical tool to 
enable our Government to negotiate good and strong agreements. 
Our Constitution vests the Congress the power to regulate 
commerce, to levy duties, and it vests the Executive branch 
with the responsibility for negotiating with foreign 
governments including issues dealing with commercial trade.
    TPA sets up a collaborative process used since 1934 when 
President Roosevelt signed the Reciprocal Trade Act, as a 
predecessor to TPA, and the Congress has passed a similar bill 
18 different times since.
    Under these procedures, the President gives Congress notice 
of trade negotiation. Congress may set objectives for the 
administration and may ask the administration to consult with 
it during the course of the administration and in return, 
Congress agrees to approve or reject, but not amend the trade 
agreement that the administration presents. Our negotiators 
cannot achieve the best trade deals if our trade partners 
expect there will be a second negotiation with Congress. 
Inevitably, they will hold back the key issues that we want the 
most in anticipation of that negotiation with Congress.
    To reach a good trade agreement requires striking a balance 
on a broad range of issues that have differing degrees of 
importance to the governments participating and a single 
amendment can upset that balance and cause the agreement to 
unravel. What happens beyond our borders for good or bad has an 
impact here. We need to make every effort to take actions that 
will generate good outcomes and minimize the bad and the 
negotiating of a strong trade agreement will have positive 
effects on our nation both economically and with respect to our 
national security. To achieve that benefit requires the 
Congress to pass Trade Promotion Authority. And I thank you.
    [The prepared statement of Ambassador Hills follows:]
    
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    Mr. Poe. Thank you, Ambassador. Dr. Green.

STATEMENT OF MICHAEL J. GREEN, PH.D., SENIOR VICE PRESIDENT FOR 
 ASIA AND JAPAN CHAIR, CENTER FOR STRATEGIC AND INTERNATIONAL 
                            STUDIES

    Mr. Green. Thank you, Mr. Chairman. I am here to talk about 
the geostrategic importance of the Trans-Pacific Partnership, 
TPP, but I want to begin by making the point that we are not 
talking about a case with TPP where we need to sacrifice our 
economic interests in order to advance our geopolitical 
interests. There are geopolitical advantages that are 
significant, but it is also likely to be a very good economic 
deal.
    These are countries, Japan, Vietnam, and others that have 
not traditionally been so open. Now they are stuck. Their old 
model of growth isn't working and they want to reduce their 
dependence on China. And the leverage is largely with us. We 
will write the rules and the estimates by the Peterson 
Institute and others are that liberalization through TPP will 
add 0.4 percent to our GDP, the U.S. GDP over the next decade. 
That is a lot of money. So it is likely to be a good economic 
deal. But let me tell you why it is important geostrategically 
to our interests in Asia.
    First, at CSIS, at my think tank, we did a survey of 
leading political thought with leaders across Asia. And we 
asked what they thought about President Obama's promise to 
rebalance or pivot to the Asia Pacific region. And outside of 
China, well over 80 percent said they wanted more of the United 
States and they supported this. But well over half said they 
had doubts that we could actually execute.
    Our ability to pass TPA and TPP, and for the Congress and 
the administration to get this done goes right to the heart of 
U.S. credibility in the region as a whole. And extends even to 
how seriously our allies take our security commitments and our 
diplomatic commitments because from their perspective this is 
so self-evidently in our own economic and strategic interests. 
So it goes right to the heart of American credibility.
    Second, a successful TPP deal will anchor our relationship 
with Japan. A deal with Japan is likely to create twice as much 
trade in U.S. exports than a deal without Japan. So it is good 
for us economically.
    For Prime Minister Abe, this is a critical way to jump 
start what is politically hard for him at home and that is 
restructuring the Japanese economy to grow. And we want the 
Japanese economy to grow and to absorb our imports, but also 
because Japan is now the second largest funder of the IMF, 
World Bank, most of the international institutions, the United 
Nations, and the most important host of U.S. bases. We have a 
stake in Japan growing and leading because we share common 
values and because Japan with some exceptions, such as their 
difficult relationship with Korea and China, is quite respected 
and popular in Asia and the anchor for our presence in the 
region.
    Third, a successful passage of TPA and TPP will decide who 
over the coming decade writes the rules in Asia. We did another 
survey at CSIS in 2009 and the majority of Asians thought that 
the most important rulemaking and trade liberalizing framework 
for Asia would be RCEP, the Regional Comprehensive Economic 
Partnership, which includes 16 countries and not us. And it is 
a China-centered trade arrangement. That was in 2009. Last year 
when we asked the question what trade architecture or 
arrangement is most likely to set the norms and the rules, the 
answer by a large margin was TPP. We have real momentum, 
particularly since Japan joined. To not pass TPA and TPP would 
be to slowly pass the baton back to others to decide what the 
rules will be, what the center of economic growth or the center 
of economic norms will be. And obviously, we want that to be 
us.
    And finally, an interesting thing is happening in China in 
response to TPP. A few years ago, the Chinese Government argued 
that this was an instrument of the United States to contain 
China and the Chinese lobbied very aggressively in countries 
like Japan and New Zealand and Vietnam to try to block TPP. 
When Japan entered the negotiations, the Chinese position 
shifted. And so for the last 2 years, reformers in China who 
want changes so that China can have a more effective economy, 
are arguing that they can use TPP the way China used the World 
Trade Organization, WTO negotiations, in the 1990s to force 
change within China. So China is not in the TPP negotiations. 
Notionally, it could be some day down the road, but immediately 
passage of TPA and TPP will give us far more leverage, far more 
purchase as we negotiate difficult issues with China because 
China will understand this is where the region is going and who 
is making the rules. Thank you.
    [The prepared statement of Mr. Green follows:]
    
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    Mr. Poe. Thank you, Dr. Green. Dr. Hamilton, your opening 
statement.

 STATEMENT OF DANIEL S. HAMILTON, PH.D., DIRECTOR, CENTER FOR 
 TRANSATLANTIC RELATIONS, THE PAUL H. NITZE SCHOOL OF ADVANCED 
        INTERNATIONAL STUDIES, JOHNS HOPKINS UNIVERSITY

    Mr. Hamilton. Thank you, Mr. Chairman. I was asked to speak 
on the geopolitical implications of the Transatlantic Trade and 
Investment Partnership, the TTIP, so I will do that. I welcome 
it because the discussion so far has been very focused on the 
economic elements of this negotiation and there are 
considerable other geopolitical elements as both you and Mr. 
Keating mentioned.
    I think it is best to understand the TTIP, not just as 
another trade agreement, but as a way for the United States and 
Europe to reposition themselves for the world we are facing, a 
world of more diffuse economic power, intensified global 
competition, and how do the core nations of the West act and do 
they act together in that way?
    It seems to me there are three broad areas of which there 
is a geopolitical national security element to the TTIP beyond 
the economics. One is about the transatlantic community itself. 
The second is how we engage rising powers and whether we do it 
together. And the third is how this will relate to the 
international rules-based systems, strengthen it or weaken it.
    On the first issue, the TTIP is potentially a powerful way 
to reaffirm the bond across the Atlantic based on our economic 
base, the geoeconomic base that we both have, $5.5 trillion 
economy, 15 million workers owe their jobs to the healthy 
commerce across the Atlantic. No other commercial artery is 
integrated as that across the Atlantic. We release every year 
an annual survey of all the jobs, trade, and investment. We are 
going to do that tomorrow. But I can tell you, Mr. Chairman, in 
Texas, the latest data show 300,000 jobs directly supported by 
European investment in Texas and if you take the trade, all the 
indirect effects, we would estimate over 1 million Texas jobs 
directly dependent upon healthy commerce with Europe. And you 
mentioned Houston's export center. Texas exports multiple times 
more to Europe than it does to China.
    The same for Massachusetts, Mr. Keating, about 150,000 jobs 
are directly due to just European investment in Massachusetts. 
About 500,000 overall if you put direct and investment 
together. And I could go on.
    There is more for Mr. Sherman, you know, there's more 
employment in Los Angeles County by European companies than 
Asian companies. California exports twice as much to Europe as 
it does to China, a West Coast state.
    And for Ms. Kelly in Illinois, 185,000 jobs are directly 
supported by European investment in Illinois and over 500,000 
Illinois jobs are dependent upon healthy commerce with Europe.
    So it is our geoeconomic base, if you will. It is also 
traditionally, of course, our geopolitical partner on so many 
issues. And yet, there are questions of trust and commitment 
across the Atlantic these days. NATO is perceived in some 
quarters to be wobbly. TTIP would be the other side of the coin 
of our commitment to Europe through our military alliance. And 
I think particularly given the issues facing European security 
these days, it is a vital reassurance of the U.S. commitment to 
Europe.
    It also would reassure Americans who wonder about the 
European Union and whether it is inward or outward looking that 
the EU would be a very strong outward-looking partner because 
TTIP would essentially make that case.
    The second area is how both of us together relate to rising 
powers. And Dr. Green mentioned a few of those elements. But I 
think one has to think about this. Those rising powers are each 
having debates on how they relate to the international system. 
Do they challenge it? Do they accommodate themselves to it? And 
the message we have to those countries as they have those 
debates is actually quite important.
    In recent years, we have had different messages or muddled 
messages, European messages, American messages. We don't have a 
message. So TTIP is a single, strong message about a robust, 
revitalized West, not defensive, but also not aggressive. It is 
about upholding standards, not eroding them. And it has an 
impact on each of the countries that we could discuss. Dr. 
Green mentioned China. It is not about isolating China. It is 
about defining the terms of China's integration, what standards 
do we talk about? It is about Russia. TTIP is essentially a 
reassertion of Western values, robust international law, 
predictability and commercial contracts, human rights, all of 
that. That is anathema to Vladimir Putin. And he is conducting 
what the KGB used to call ``active measures'' to subvert the 
TTIP because he understands what it means. So it has a huge 
impact on Russia. It is a symbol of unity.
    The last piece is how we together will relate to the 
international rules-based system. We were the stewards of that 
system. And so the question of the TTIP is can we again 
establish standards at a high level that protect our workers, 
our consumers and labor, or do we allow each of our standards 
to start to erode because we don't have an agreement? Those are 
the kinds of things that I believe will strengthen the 
international system rather than subvert it. Thank you.
    [The prepared statement of Mr. Hamilton follows:]
    
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    Mr. Poe. Thank all of our witnesses. I will yield 5 minutes 
to myself for some questions and then we will move through the 
panel as well.
    Big scheme of things, I believe in free trade and trade 
with countries throughout the world for all the reasons we have 
talked about. The problem is always, as my friends have said, 
the devil is in the details. There may be something in an 
agreement that we don't like for a lot of reasons, politically, 
economically, human rights, whatever. We have got TPA that I 
think, Ambassador, you said has been approved 18 times in the 
last 30, 40, 60, 80 years.
    Ambassador Hills. Seventy years.
    Mr. Poe. Seventy years. Thank you, Ambassador. And then we 
have TTIP and TPP. We start with the Trade Promotion Authority. 
Congress has to approve that and there is some cynicism in 
Congress because we can't get much information from the 
administration. We have asked the administration eight times to 
testify before our Committee on Foreign Affairs. I had spoken 
with Mr. Froman. Michael Froman, in 2013, was the first time he 
promised me he would give me a private briefing. Well, we 
haven't had it yet. So there is some skepticism or suspicion, 
if you will, about what has taken place because Congress then 
has the problem of well, do we give the administration the TPA, 
the Trade Promotion Authority, even though we are not really 
getting much information out of the administration on what the 
end game is with these two trade agreements?
    Ambassador, can you help us out a little bit about what is 
going on with the administration and whether we should press 
that issue a little more or is that just the way it is?
    Ambassador Hills. I have to say when I served, I spent a 
good time with my friends on the Hill, both in this body and in 
the Senate. I found having executive sessions with those who 
were interested, and often it is hard to get Congress to be 
interested, an executive session is useful. And I say that 
because when you are negotiating, whether you are negotiating 
to buy your house or your car, you want to keep your 
negotiations not public. You don't want them on the front page 
of the newspaper so the persons you are negotiating with know 
what your strategy is. But Congress and the Executive Branch 
must have a collaborative arrangement. I can tell you it works.
    I could not have done the negotiations that we did without 
my friends on the Hill. They understood that it was necessary 
not to publicize so widely what we were trying to get from 
multiple governments. Because what you want to get from 
Government A may offend Government B, and so any negotiation 
requires some degree of discretion.
    I would encourage you to have executive sessions and I am 
certainly happy to encourage Mr. Froman to meet more often with 
you. I am shocked that you say you have not seen him since 
2013.
    Mr. Poe. For a briefing, that is correct. I appreciate that 
insight and going on, moving on to the specifics of the two 
agreements, let me just talk about Europe.
    Dr. Hamilton, anybody else can weigh in on this as well. 
When I visited Ukraine, the President told me that he sure 
would like to see some natural gas coming from the United 
States. In 2009, I think, the Russians turned the gas off for 2 
weeks in the winter. It was cold because I happened to be there 
for part of that time. I understand the economic hostage that 
the Europeans feel. You can hear it in what they say because 
they are very careful about saying things to me, it seems like, 
to not offend the Russians because they are getting their 
energy from them.
    So just theory, not the details of an agreement with 
transatlantic partnership, how would that help economically 
Europe, but also help economically the United States if we 
dealt with energy, for example.
    Mr. Hamilton. Thank you, Mr. Chairman. Well, you are 
absolutely right. Energy is a really important part of this 
relationship. The quick answer would be that a TTIP would 
enable us to go around some of those onerous requirements you 
mentioned, the Department of Energy and so on because if we 
have a free trade agreement with partners, much of that opens 
up. But it doesn't quite do the job.
    My critique of the current TTIP is that there is a 
discussion about a proposed energy chapter, but both sides have 
not quite embraced it. And it is not only about free flow of 
energy in the trade sense because many on the U.S. side would 
say well, if we get the trade deal it frees up all of those 
problems, so what is the issue? Why do we have to have a 
chapter? I think it goes more to this point about standards and 
norms.
    If we could agree across the Atlantic on some basic 
principles governing energy trade to strengthen the rules-based 
order, that would become core, global benchmarks. And Ukraine 
is a good example. We have currently, across the Atlantic, for 
instance, noncontroversial, a basic principle that when a 
monopoly owns a pipeline, third parties have mandatory access 
to that pipeline. That we agree. In the United States, we 
agree. In the EU, it is not a global principle. And you can 
imagine if we could enshrine that as a principle what it would 
mean for a country like Ukraine because it would start to raise 
the bar in terms of how we engage. So setting the bar higher, 
because of how we work with Europeans is really an important 
part of TTIP. It goes beyond opening up just the transatlantic 
market, but we could do that at the same. That would provide 
huge benefits for U.S. energy producers.
    You see the other argument was about Asian prices being far 
higher than in Europe, but that has now changed. And the 
political signal to those who have to invest in infrastructure 
over a 5-, 10-year period happens today. They don't invest for 
5, 10 years if they don't get the political signal now. And 
that is why the third element of why that is so important.
    Mr. Poe. Thank you, Dr. Hamilton. My time has expired. I 
will yield to the ranking member from Massachusetts, Mr. 
Keating.
    Mr. Keating. Thank you, Mr. Chairman. TPP is supposed to 
help address the U.S. trade issues with China and China has a 
long-term history of currency manipulation. During the time 
that TPP has been under negotiations at least 60 senators and 
230 members of the House have called for binding currency 
disciplines to be included in the TPP. As far as I am aware, 
U.S. negotiators have not even introduced language related to 
currency, much less secure its approval from other TPP parties.
    If the TPP lacks enforceable currency rules, it seems China 
and other manipulators would be free to conduct business as 
usual. How then will TPP be an example of the U.S. writing the 
rules? And is the freedom to game the system by manipulating 
currency really a rule we want to promote? I will let any of 
the panelists address that.
    Mr. Green. Thank you. Our goal with China over the long run 
should not be to increase government control of currency. Our 
goal should be gradually for China to move toward more of a 
market-based currency so that the value of the renminbi 
reflects what is fair and economically logical. So I would 
think in our negotiating strategy we should be taking measures 
that encourage that move toward market-oriented factors, and in 
a broad sense TPP and TTIP will do that and will reinforce 
those within the People's Bank of China or within the Chinese 
system who also think that their current policies are a trap 
for them. They can't manipulate monetary policy effectively 
with the current currency strategy that they have. It is a 
longer-term game with China that I think should be shaped by 
market-base rules.
    And the other thing about currency manipulation, I would 
say, is the G7, the G20, the IMF have acknowledged that a lot 
of us, including the United States and Japan, have engaged in 
monetary using to get out of the financial crisis, the economic 
crisis we were all in and in Japan's case to get out of 
deflation. And I think that is sort of self-policing process 
that is quite effective in these international financial 
meetings and organizations. There is legislation, of course, 
for the Treasury Department to report on currency manipulation 
and that would be an area to focus, I think, if there were 
concerns going forward.
    Mr. Keating. What would be the harm in having that kind of 
language inserted? Why is that not addressed? Why do you 
suppose that that is not in the agreement?
    Ambassador Hills. In my own view, the trade agreement 
should try to open the market and create opportunity. We have 
institutions like the IMF and the G20 that can focus on 
currency. We have been using our currency to try to stimulate 
our economy. We would react poorly in my humble opinion, if 
other countries or even an institution were to tell us that we 
should back off. So I think that our trade agreements, both TPP 
and TTIP, should seek to open opportunities.
    You mentioned jobs in your opening remarks. And I was 
struck by the fact that even with the 28 nations that make up 
Europe, we are losing competitiveness because of regulatory 
turmoil. And by having harmonization, we will help small- and 
medium-sized businesses that are responsible for 90 percent of 
the new jobs. There are many small businesses in the United 
States that do not export to countries that speak their 
language, that want their product, because they cannot handle 
the paperwork.
    Mr. Green. I would, of course, agree and the only thing I 
would add is that in these agreements, these kinds of 
mechanisms are always reciprocal. So we may have a mature and 
fair and market-oriented sense of whether there is currency 
manipulation, but our partners in these agreements will also 
have the opportunity to set up triggers. And we will lose 
control of that if we are not careful.
    So we have a system with the IMF, the G20, the G7 that is 
effective that works for us. There is the legislation on 
treasury reporting, but we want to be careful about 
accidentally arming our trading partners with things that would 
be used against us with far more devastating effect than we 
might consider using them ourselves.
    Mr. Keating. Great. Thank you. I yield back. My time is up.
    Mr. Poe. I thank the ranking member. The chair will 
recognize the gentleman from California, Mr. Issa, for his 
questions.
    Mr. Issa. Thank you. And it is really a pleasure to have 
you here.
    Ambassador, I will start with you. During the NAFTA era, 
first Canada, then Mexico, I think we discovered something 
which is even when people say they are for free and fair trade, 
everyone has something that is missing that needs to be 
included. When we did Canada, the labor unions didn't have a 
problem because the AFL-CIO moves across those borders 
transparently. Even though there are very strong unions in 
Mexico, lo and behold, if U.S. unions were not welcome, then 
they objected.
    Moving forward though, we have in the case of Europe, for 
example, partners who join NATO and pay a very small share. 
They want common defense and in some cases to even join us in 
defense of our world liberties, but they do so at about half as 
much contribution. These have never been part of trade 
agreements. In other words, we talk about harmonization--and I 
am concerned--but whose harmonization? If it is not explicit 
within the bill at the time that Congress approves it, then are 
we harmonizing the European Union changing laws? That is what I 
want to get to.
    The European Union is and I will be in Brussels in a couple 
of days, and someone will note that I have said this, but the 
European Union is an unfair trading partner because they do 
create nontariff trade barriers all the time and they do it 
systematically.
    Do you believe that the administration can effectively 
create at least an arbitration capability so when they put up 
nontariff trade barriers, time and time again, and we will just 
use the fact that you can't sell an oil unless you can certify 
that the container that carried the oil, vegetable oil, never 
had a GMO in it. Okay. Now the absurdity of--by the way, it 
wouldn't matter if it wasn't consumed or not, whether it was 
being frying oil or anything. They wanted none of it.
    Those sort of decisions are currently available to the 
Europeans. They use them regularly. Today, they are trying to 
break up Google. They have a number of those. So I guess my 
question is it used to be trade was all about trade. Then it 
became trade plus union considerations under the guise of human 
rights. Then it became environmental in addition to that. 
Should we also look at the regulatory burdens that may be 
placed on our companies when they do try to export in a low 
tariff environment and find these nontariff trade barriers 
being erected? Is that something the administration should be 
putting into trade agreements, at least the process?
    Ambassador Hills. Actually, the focus of the TTIP is to get 
regulatory harmony and the greatest amount of economic benefit 
will come not from tariff reduction, although you will get some 
of that. Because our average tariffs are about 3 percent, we 
had several dozen that are very high.
    Mr. Issa. Have you ever tried to import a leather jacket? 
You are going to find out that there is like 12 different 
tariffs we still have in place.
    Ambassador Hills. But the regulatory problem, you know, you 
want to buy a car and you want to sell a car, we have different 
rules for the lights, the steering wheel, the windows going up 
and down.
    Mr. Issa. Let me get you on that, because that is perfect. 
You were there during the NAFTA negotiations. Mexico agreed to 
allow our automobiles in under specific requirements including 
an unlimited amount of early automobiles. Mexico has 
systemically tried to prevent those after the fact and today 
they are preventing the export of older U.S. cars which--some 
of which have been salvaged and so on. There is no question. 
But they are preventing it in spite of an agreement in NAFTA 
and their guise is that these are polluting. So even in the 
case of our agreement with Mexico, Mexico simply has 
disregarded elements of the trade agreement and we have no 
enforcement mechanism for it.
    And I bring this up because I support free trade, but I 
also watched China sign on to the WTO and then ignore it; 
Russia get into the WTO and then ignore it. These countries are 
right now exporting, if you will, more great American movies 
than we do. The problem is they were originally ours.
    Ambassador Hills. Well, let me focus on your point about 
Mexico. Our trade with Mexico has gone up five fold. Our small- 
and medium-size businesses----
    Mr. Issa. And I am totally there for that. I came and I 
argued on behalf of the chamber for it. But it is not a 
question of successes. The question is when they selectively, 
any trade partner, uses a tactic including one explicitly 
prohibited, do we demand that the administration put from past 
experience arbitration or other capability to stop it? Like I 
say, it doesn't matter how much you trade with Mexico, if you 
tried to export a few hundred thousand cars that are surplus in 
the U.S., older cars, you will find out Mexico won't take them 
even though they signed an agreement saying they clearly would.
    Ambassador Hills. What Mexico has agreed to is to give 
national treatment. And they do not have a surplus of old cars. 
The same pollution standards----
    Mr. Issa. Ma'am, ma'am. Have you been to Mexico lately? 
There are so many old Volkswagens driving around there, they 
simply don't want our new old Volkswagens.
    Ambassador Hills. What I was about to say is that the 
pollution standards for those coming into Mexico and those that 
are there are the same. They are given national treatment. If 
someone is exporting and feels they are not getting national 
treatment and they are being discriminated against, yes, there 
must be a mechanism for resolving that dispute. That has not 
been a primary problem with Mexico. Our trade has increased. 
Our investment has increased. In fact, most manufacturers and 
particularly, small and medium size manufacturers, will say 
that they not only sell things to one another back and forth 
across our northern and southern borders, they make things 
together.
    Mr. Issa. I was only asking you, should in a trade 
agreement there be a mechanism if a company claims that to be 
true? The fact is, it is true and we do have the companies that 
have found these changes that unfairly, essentially after the 
fact, decide they are no longer going to take American cars.
    Ambassador Hills. Is a mechanism?
    Mr. Issa. Okay, so you do believe it should be there and it 
should be enforceable?
    Ambassador Hills. There is a mechanism in all agreements. 
NAFTA has one. The WTO has one.
    Mr. Poe. The gentleman's time has expired.
    Mr. Issa. Thank you, Mr. Chairman.
    Mr. Poe. The chair recognizes the gentleman from 
California, Mr. Sherman, for his questions.
    Mr. Sherman. Thank you. All the advocates of these 
agreements talk about exports, but they don't subtract out 
imports, so then they argue that if we export $1 billion and 
import $2 billion that is great because we have got $3 billion 
in trade. The fact is if exports create jobs, imports take them 
away. That is why the change in our trade policy that began in 
the late 1980s has accompanied the total destruction of the 
American middle class.
    We focus just on the jobs we lose. But that is not the sole 
focus. It is keeping wages down. First, an employer says--and 
the Ambassador was talking about how employers love this 
because they can say we are going to cut wages or we are going 
to move the jobs. We will open up a new plant or the nicer ones 
say, we have got to keep wages low because we face free access 
to the U.S. market from 50-cent-an-hour Vietnam labor. So we 
have got to keep wages low.
    Then some factories shut down. That creates more workers. 
Supply and demand, that keeps wages down. And then states see 
that wages are down, the supply of workers is up, we had an 
economic crisis, so they become right to work states and then 
no unions, no raises. And so the decimation of the middle class 
has been accomplished before we even lose many jobs. But of 
course, we have lost millions and millions. So the American 
people aren't going to allow us to do this unless we fool them 
and tell them it is about national security because they know 
it hurts our country.
    Now we are told that this is an anti-China system that we 
are creating. Well, wait a minute, the same advocates are the 
ones who advocated the worst trade deal we ever had permanent, 
most favored nation status with China. So we enter into that 
agreement in the late 1990s. We give away millions of jobs to 
China which strengthens them to the point where in order to 
repair the geopolitical problem we have to give millions of 
jobs to China's neighbors. So first you give the jobs to China, 
strengthen them, and then give the jobs to China's neighbors to 
strengthen them. Everybody is strong except America and our 
families.
    Then we are told that we will deprive ourselves of the 
great honor of defending Japanese and Korean islets. They are 
really uninhabited rocks at great expense to the United States. 
For the benefit of countries in the case of Japan, it has spent 
less than 1 percent of their own money on their national 
defense. So we will lose the chance to spend hundreds of 
billions of dollars protecting islets which, if they have any 
oil, and they don't, it is not our oil. But everything going on 
at the Air Force and Navy is how can we spend hundreds of 
billions of dollars in our research and procurement to prepare 
ourselves to protect these islets and oh, by the way, let us 
give away millions of jobs so that we will have the opportunity 
and be invited to provide this defense of rocks for free.
    No wonder all of Wall Street is for this deal and all of 
America is against it. Although given the amount of money that 
has been spent to propagandize to the American people, I guess 
it is not surprising as many as one third could be fooled into 
supporting this agreement.
    My question is we are told that we have got to include 
Vietnam in this agreement. We know we might have to include 
Vietnam, because that is the 50 cent an hour labor that will 
make sure we can really drive wages down in the United States, 
but that is not the given reason. We are told we have to 
include Vietnam because we will get free access to their 
markets, but of course, Vietnam has no freedom and they have no 
markets.
    Dr. Green, is there any evidence that by signing this 
agreement, the Vietnamese Government and its Communist Party 
will not be in control of all major exports, $1-billion 
contracts, $100-million contracts of American goods entering 
Vietnam? Do they lose control so that some business person can 
contradict party policy safely and import American goods?
    Mr. Green. So this is an important question and I think it 
is good that the ranking member and that you and others are 
focused on it because we have an important stake not only in 
our economic relationship with Vietnam, but with the 
improvement of governance, human rights, and democracy in these 
countries. I have been disturbed that the U.S. Government 
spending on governance and human rights and democracy has 
dropped almost in half in the past 8 or 9 years. I just mention 
that because trade is not the answer for all these problems. 
There are other tools we need to bring to this, but I think it 
is an important question.
    I worked for 5 years in the NSC for President Bush on Asia. 
Went to Vietnam to press these issues. Vietnam reformed about 
halfway, the so-called Doi Moi reforms. So about half of the 
Vietnamese economy is government dominated and about half is 
moving toward a much more free market direction. We definitely 
have an interest in terms of economics, strategic relations and 
human rights and democracy in spreading that nongovernmental 
sector.
    Mr. Sherman. Do you think that a business person in 
Vietnam, when they get a call from the Communist Party saying 
don't buy the American goods, oh yes, we have published our 
reduction in tariffs. Oh, yes, we have signed written 
agreements, but we are telling you on the phone don't buy the 
goods, that that businessman is going to call a press 
conference, denounce the Communist Party and announce how he is 
being pressured? Can you imagine that happening in Vietnam? Or 
is what is much more likely the businessman will say, ``Yes, 
sir. I will buy the German goods if you think that is better. I 
will buy the Chinese goods if you think that is better. I will 
do whatever the party wants.''
    Can you point to one case where someone in control of a 
$100-million enterprise in Vietnam has stood up and denounced 
party interference in their import and export decisions? And it 
is never going to happen, is it, because they are going to be 
killed.
    Mr. Green. But is there a case where an American CEO has 
stood up and condemned policy in the United States that doesn't 
directly affect their business? I would say this though----
    Mr. Sherman. Well, I am talking about something that would 
affect their business and yes, there are plenty of business 
people that condemn our foreign policy every day from both 
angles. I hear from them every day. I know my time has expired, 
but the idea that you are going to have labor rights in 
Vietnam, that you are going to have free markets in Vietnam, 
that no one is going to be disappeared in Vietnam, is something 
you can believe only if you are so dedicated to this agreement 
that your eyes are closed. I yield back.
    Mr. Green. So I spent time on the ground in Hanoi.
    Mr. Poe. Briefly comment or answer that.
    Mr. Green. Thank you, Mr. Chairman. I spent time on the 
ground in Vietnam, working to expand the number of house 
churches, to end the prosecution of Catholic bishops and 
parochial schools when in government and we had success. Why? 
In part because at the time we were negotiating normal trade 
relations. We had considerable leverage (a), and (b) because 
the Chinese ultimately did not want to fall into China's orbit.
    So we have leverage and we have an opportunity now to 
influence this and no, Vietnamese business leaders are not 
standing up and condemning the Communist Party, but many, many 
more Vietnamese than Chinese are on the internet and in other 
ways protesting their government as they have more 
opportunities and more choices.
    Mr. Sherman. Dr. Green, every single group in America 
dedicated to human rights in Vietnam says vote no on TTP. I 
yield back.
    Mr. Poe. I thank the gentleman from California. He yielded 
back twice, so I will take it the second time. I thank all of 
you for being here. You can see that this is an important issue 
for all the members up here. Our opinions vary tremendously. We 
will see how it ends up down the road, but thank you for your 
time and thank you for your testimony. The subcommittee is 
adjourned.
    [Whereupon, at 3:15 p.m., the subcommittee was adjourned.]
                                     

                                     

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